Wednesday 23/06/21

  1. In MACRO & CRYPTO NEWS, Bermuda pushes back on global tax, the UK’s economic rebound is better than expected, British industrial output hits new highs, Bitcoin’s plunge continues and Monero is fast becoming the criminals’ cryptocurrency of choice
  2. In CONSUMER NEWS, house prices in Europe and the US hit record levels, more millionaires were created under lockdown and wages get a push from the “Amazon effect”
  3. In IPO NEWS, Krispy Kreme aims for a New York listing and Victorian Plumbing’s IPO looks like a success so far
  4. In MISCELLANEOUS NEWS, Google faces an EU antitrust investigation and Resorts World opens in Las Vegas
  5. AND FINALLY, I bring you an incredible cardboard cosplayer and a cat groomer fail (well, sort of)…

1

MACRO & CRYPTO NEWS

So Bermuda resists, the UK continues to rebound, industrial output rises, Bitcoin’s suffering continues and Monero emerges…

‘It’s a sovereignty issue’: Bermuda digs in against global tax deal (Financial Times, Gary Silverman) highlights Bermuda’s annoyance at being caught up in the whole global minimum tax debate. In an interview with the FT, the country’s finance minister Curtis Dickinson, said that now was not the right time to impose this tax in Bermuda as the nation is trying to drag itself out of its own Covid nightmare. He argues that the tax would make the country more bureaucratic and make things more complicated for businesses. * SO WHAT? * It seems that the global investor community seems to be pretty “meh” about the whole thing as share prices haven’t really reacted that much to the news of a potential global minimum corporation tax of 15%. The G7 are keen, but the next step will be to get it ratified by the G20. I suspect that a lot of the low-tax countries who rely on their status as tax havens for income will club together to try to push back collectively as I would have thought that would be the best option to knock this thing on the head. I think it’s a good idea in principle, but the implementation is always going to be difficult. IMO, it was highly suspicious that the big companies that this was supposed to cover, like Amazon, actually voiced support for the move. In reality you would have thought that it would be a sign of the legislation hitting the spot if they’d have complained! 

Meanwhile, the positive news on the UK continues in Economic rebound reduces hit to UK public finances (Financial Times, Valentina Romei) as the latest data from the ONS shows that the public sector net borrowing figure is way better than what the Office for Budget Responsibility (OBR) had been predicting. * SO WHAT? * The figure is lower than expected because the employment situation has recovered quite quickly, meaning that fewer people are on furlough (which costs the government a lot of money). Still, the figure of £24.3bn in May, excluding public sector banks, is the second highest borrowing figure for May since records began in 1993. This is good news as it will give the

government some degree of wiggle room, but taxes are still highly likely to increase a few years down the road in order to pay for everything.

British industry’s output now at record growth levels (The Guardian, Phillip Inman) cites the latest data from the Confederation of British Industry’s quarterly manufacturing survey which shows that British factories had their sharpest jump in output on record in June, but added that they also expect to raise their prices at the steepest rate in almost 40 years due to shortages of key parts and materials. * SO WHAT? * This is yet more food for thought for the Bank of England’s Monetary Policy Committee when they discuss what to do with interest rates because this just looks like a huge neon sign announcing further rises in inflation!

In cryptocurrency chat, Bitcoin falls under $30,000 for first time since January amid crackdown in China (Daily Telegraph, Matthew Field) shows that Bitcoin had a major drop yesterday but recovered as trading volumes increased by 15% due to investor selling. Other cryptocurrencies, including ethereum, also fell as sentiment continues to be dented by China’s crackdown on Bitcoin and the like. I thought I’d include Monero emerges as a crypto of choice for cybercriminals (Financial Times, Hannah Murphy) as it seems that Monero is gaining in popularity among naughty people as it is designed to hide both the sender and receiver, unlike Bitcoin which leaves a trail of transactions on blockchain. Ransomware groups are particularly keen on it – and the Russia-linked REvil, which attacked meatpacker JBS earlier this month, has removed the option of paying Bitcoin and moved to using Monero only. One crypto compliance expert reckons that about 10 to 20% of ransoms are now paid in Monero and that this figure will rise to about 50% by the year end. * SO WHAT? * If you are a crypto-hater, you’ll add this to your arsenal of arguments against but if you are a Bitcoin fan I would have thought that you will use this to say something along the lines of “Bitcoin is legit now because all the crims are paying in Monero”. I’d say that is a weak argument at the moment but it could become increasingly true as time goes on!

2

CONSUMER NEWS

House prices in Europe and the US hit new heights, more millionaires emerge from lockdown and wages rise on the “Amazon effect”…

In news that gives us an insight into the mind of the consumer, House prices climb to record levels in US and Europe (Financial Times, Martin Arnold, Colby Smith and Matthew Rocco) shows that the average price of existing US houses has risen by a record 23.6% year-on-year, according to the National Association of Realtors, while some areas of Europe have also seen a considerable uptick. Existing house prices in the Netherlands, for instance, rose by 12.9% in May from a year earlier. This is the fastest growth rate since 2001, according to the Dutch Statistics Office. It is also interesting to note that that ECB said that in Q4 last year, Eurozone house price growth was 5.8% higher than the previous year, which is the steepest growth rate since mid-2007! Germany, France and the Netherlands made up almost 75% of the Eurozone’s overall increase in house prices over the course of 2020. * SO WHAT? * Again, stats like this are going to pile the pressure on to the ECB to raise interest rates to curb inflation. They are sticking to their guns at the moment, but this kind of rise can’t go on forever. They will probably hope that the comparatives are going to narrow (i.e. as the year goes on, comparing September 2020 with September 2021 and October 2020 with October 2021 are going to look less and less impressive), but if they don’t, their excuses for NOT raising interest rates will look increasingly weak. Mind you, you could argue that the ECB has a lot of form in ignoring calls to raise interest rates – they kept them super-low years after the financial crisis had effectively ended, for instance.

More than 5m people become millionaires despite pandemic (Financial Times, Alistair Gray) shows that the old adage of the rich getting richer continued to ring true under lockdown as a Credit Suisse report showed that over 5m additional dollar millionaires were created in 2020 – and the number of those worth at least $50m increased by over 25%!!! Rising equity and residential property valuations proved to be major drivers, widening the gap between the rich and poor in many countries. On the other hand, an estimated 2.9bn people (about 55% of all adults) had less than $10,000 in net assets. Apparently, one in 200 people in China is a millionaire versus 8% in the US and 15% in Switzerland! * SO WHAT? * I guess the hope here is that the rich deign to spend money on us plebs, which will increase the number of jobs etc. The thing is, in my experience, a lot of rich people don’t actually spend as freely as you’d think (which is why some of them are/stay rich!) so it is not a given that the more millionaires you get, the more spending you are going to see. Mind you, you’d hope that at least SOME of this money will trickle down to the “real” economy…

Talking of the real economy, Amazon effect’ sets the tone for US worker’ remuneration (Financial Times, Andrew Edgecliffe-Johnson) shows that wages are rising in America in part because Amazon has been raising the bar on wages amid a massive hiring spree last year. In the US, it paid a minimum of $15 an hour before benefits – a rate that is double the federal minimum wage. Other biggies like Walmart and Target followed suit, meaning that expectations have since continued to rise among the low-wage workforce. * SO WHAT? * This is great if you are a worker who happens to live near any of these big employers, but it is a nightmare for smaller businesses who have been hit hard by the pandemic and are trying to recover. I suspect this is/will soon be a major problem around the world as we emerge from the pandemic.

3

IPO NEWS

Krispy Kreme aims for a listing and Victorian Plumbing’s IPO has yet to spring a leak…

Krispy Kreme heads for $4bn listing in New York (Daily Telegraph) highlights the doughnut purveyor’s intentions to float on the New York Stock Exchange with a near-$4bn valuation in mind. It is planning to sell around 26.7m shares for somewhere between $21 and $24 per share. If it floats at the top end of this range, it will raise about $640m. * SO WHAT? * Krispy Kreme was bought by JAB and taken private in 2016, but since then it has increased its online sales to the extent that they now account for almost 20% of sales in the US via its brilliantly-named Insomnia Cookies home-delivery service. I would have thought that this will be a popular flotation among retail investors especially. Who doesn’t like comfort food?!?

Victorian Plumbing IPO marks biggest debut on London’s junior market (Financial Times, Jonathan Eley) highlights something that feels like it has been relatively rare of late – a successful London IPO! Share in the company shot up by about 20% on their first day of trading, making it the biggest IPO ever for the junior Alternative Investment Market (AIM). The company did well under lockdown given that it is in the home improvement space, so it was clearly a good time to float! It is particularly attractive because it has no stores and sells online. Although 86% of its customers are retail, it wants to increase its share of trade. * SO WHAT? * You do wonder whether it floated right at the peak (which you can’t blame it for doing, of course!). Still, as long as the housing market keeps rising I would imagine that the company’s business will prosper.

4

MISCELLANEOUS NEWS

Google faces more investigation hassle and Resorts World opens in Las Vegas…

Google faces EU antitrust probe of alleged ad-tech abuses (Wall Street Journal, Sam Schechner and Parmy Olson) shows that the European Commission is now going to do a deep dive into allegations of Google abusing its role in advertising after conducting informal inquiries since at least 2019. It will be looking at how Google brokers ads and shares user data. * SO WHAT? * Sounds good, but let’s face it the EU has proved to be pretty ineffectual against American Big Tech. On the other hand, you would have thought that the Biden administration is more minded to crack down on the giants than Trump ever was, so there’s a sliver of a chance that any conclusion may get some backing stateside. Now if they could team up with America’s antitrust players, THAT might actually work…

Resorts World to open in Las Vegas as business rebounds after Covid-19 (Wall Street Journal, Katherine Sayre) heralds the advent of the Strip’s first new megacasino – the $4.3bn Resorts World – in over ten years! It is owned by Malaysia’s Genting Group and comprises of a 3,500-room hotel with massive gambling and meeting spaces along with two theatres where Celine Dion and Katy Perry will start residencies later this year. If all that gets you a bit hot under the collar, you will be able to cool down in one of its seven swimming pools! It is one of the biggest resort projects on the Strip and is comparable to the likes of the Bellagio or Venetian. * SO WHAT? * What a time to open!!! The project has been off and on for years, but I would have thought that there will be MASSIVE pent-up demand – and the recent opening up of conference venues is also going to be pretty positive I would have thought. It all sounds great, but they will clearly need no more shutdowns otherwise it could all end in tears…

5

...AND FINALLY...

…in other news…

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Some of today’s market, commodity & currency moves (as at 0736hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!

FTSE 100 *Dow Jones *S&P 500 *Nasdaq*DAX *CAC-40 *Nikkei **Shanghai **
7,082 (+0.28%)33,945.58 (+0.20%)4,246.44 (+0.51%)14,253.27 (+0.79%)15,628 (+0.16%)6,608 (+0.08%)28,899 (+0.05%)3,567 (+0.27%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿
$73.32$75.42$1,780.091.395121.19295110.861.16947$34,104.92

(markets with an * are at yesterday’s close, ** are at today’s close)